January 2, 2016: Après Moi, Le Déluge

There is some controversy on the origin and meaning of the title of this week’s show. I am going to go with the alternatives that best fit what I am trying to say this week…

Therefore I am going to go with King Louis XV of France as the author and his estimation that after his death that chaos would ensue.  In fact, 15 years after his death the French Revolution took place and the world was never the same.

It seems fitting that like Louis XV, MMXV (2015) may be the last year of relative peace in the market for awhile. As I have pointed out many times, I have not generally been in the gloom and doom camp in the short-term; however, I believe we will ultimately face a 50-70% drop in the markets at some unknowable point. In 2013 I thought the market would move higher (it did). Same in 2014, but I became more concerned. In late 2014 I predicted volatility would probably increase Q1 of 2015 (it did) and I thought the market was beginning to weaken noticeably in May 2015 (it was).

Here is what I see now. Earnings are dropping, revenues are dropping, commodity prices are falling, the EM countries have huge debt problems (as do the DM countries, but they have more time before they hit the wall), the dollar is rising (which will exacerbate all of the foregoing problems) and much of the world is in chaos. The one thing that I believe has moved this market higher was free money from the Fed, triggering record M&A, stock buybacks, investors buying on margin as well as taking away investors’ alternatives for generating returns (such as bonds). That is now going away. As I have said many times, it isn’t  the .25% increase that is important, it is the message it sends that this game is over, and the smart money will find another one to play. Given all that, what can drive this market substantially higher? In my opinion, nothing outside of direct Fed or other government buying to support the market through the election. However, that could happen and the market may tread water for another year, so you have to be prepared for anything in 2016.

In this week’s show we focused on these ideas in more detail. We also talked about how the wave of M&A this year would likely lead to downsizing of hundreds of thousands of people with decent jobs next year. We discussed how we are likely to see very low rates of return in the markets for the next 10-20 years, and how this would expose the state and local pensions as much more underfunded than people pretend they are right now. Most of these pensions assume that the market will return over 7.5% a year through infinity, even to reach the shortfall levels they are at now, and these returns are very unlikely. As an example, the State of Illinois pensions are supposedly 42% funded (which isn’t great), but that assumes 8% annual returns. If I’m right, they are probably 20-25% funded. Where is the rest of the money coming from?

Speaking of where is the money… I have been warning about Puerto Rico defaulting for over 18 months. They are already technically in default, but it looks like it is about to get much worse. This is just the tip of a very large iceberg.

The bottom-line is this. This market is hollow and with weakening fundamentals and the Fed starting to pull the punch bowl, we are getting closer to the day of reckoning. That doesn’t mean it has to happen this week or even this year, but it must happen, and you need to prepare before the crash comes; because it could come at any time.

Check out this week’s show here:

Given this week’s topic we are going to be doing a special class, “Buy your umbrella before the rains come”. We will discuss not just surviving, but profiting from both up and down markets; we are likely to see both. If you would like free tickets, call 84-48-Income (844.846.2663) and tell them that you read about it on the Next Week In Stocks website. I hope to see you there!

Click Here For Free CD Offer!

If you would like to submit a question to the show, or to give us feedback, please send an email to:  phoenix@tradingacademy.com. Also, check out our sister show, “The Right Side Of The Trade” on the following stations:

◾Money Radio 1510 and 99.3: Thursday and Saturday at noon

◾1100 KFNX: Sunday at 11am and Wednesday at 3pm

Of course, you can always find “Next Week In Stocks” on:

◾550 KFYI: Saturday at 1pm and Sunday at 4am

December 19, 2015: Philosophical Differences

Henry Blodget, one of the internet “gurus” of the late 1990’s, recently stated that he thought stocks could fall significantly at some point, perhaps 30-50%. He also believes that stocks are largely overvalued and that overall stock returns could be weak for years http://www.businessinsider.com/stocks-2015-8. We are in total agreement on all these points, as well as on the fact that the timing of a stock crash is unknowable.

However, we have two totally different approaches to this problem for the retail trader. Blodget’s perspective is to continue to hold and hope stocks come back after a crash. Our belief is it makes much more sense to protect what you have and make money on the downside as well as upside. We agree that markets will likely come back, but why lose 50% (or more) of your money, then hope for the 100% return that gets you back to even? In addition, you can never get the time back that you lose waiting for the comeback. In this week’s show, we talk about what we think is a better way. Check it out here:

In a market like this it is very important to protect what you have, while also making money on both the upside and downside moves. This topic will be the focus of an upcoming class, “Improving Your Returns In Up and Down Markets”. If you would like free tickets, call 84-48-Income (844.846.2663) and tell them that you read about it on the Next Week In Stocks website. I hope to see you there!

A note, this show was recorded on 12/14, but is being posted 12/17 at about 3am. The Fed did raise yesterday and markets rallied. I’m not sure this is a sustainable rally. Watch the market carefully over the next few days, but  we still need a close above about 2,130 on the S&P to even think about another move higher.

Click Here For Free CD Offer!

If you would like to submit a question to the show, or to give us feedback, please send an email to:  phoenix@tradingacademy.com. Also, check out our sister show, “The Right Side Of The Trade” on the following stations:

◾Money Radio 1510 and 99.3: Thursday’s and Saturday’s at noon

◾1100 KFNX: Sunday’s and Tuesday’s at noon

Of course, you can always find “Next Week In Stocks” on:

◾550 KFYI: Saturday at 1pm and Sunday at 4am

December 12, 2015: Two Roads Diverged In A Wood…

On December 16th, the Fed will make a momentous decision, do they raise or not raise interest rates? As we’ve said for a long time, raising will cause many problems and there is really no reason for them to do it now. That said, they may have talked themselves into a corner and they may do it to maintain “credibility” (using the term loosely). The reality is, it may not matter what they do. There is no recovery, so what will drive stocks higher? If the Fed raises, the game will clearly be over and stocks will likely sell off (maybe not immediately, but it is hard to see how they go much higher). There will be all of the other problems we have discussed as well, weaker earnings for US companies, Emerging Market debt problems, etc. If they don’t raise, it may raise concerns about the health of the economy. Combined with what is likely to be a weak Christmas and a volatile Q1 2016, the market may sell off in this scenario as well. It is hard to see the catalyst that takes the market higher; the top is very possibly already in.

To learn more, check out this week’s show here: 

In a market like this it is very important to protect what you have, while also making money on both the upside and downside moves. This topic will be the focus of an upcoming class, “Improving Your Returns In Up and Down Markets”. If you would like free tickets, call 84-48-Income (844.846.2663) and tell them that you read about it on the Next Week In Stocks website. I hope to see you there!

Click Here For Free CD Offer!

If you would like to submit a question to the show, or to give us feedback, please send an email to:  phoenix@tradingacademy.com. Also, check out our sister show, “The Right Side Of The Trade” on the following stations:

◾Money Radio 1510 and 99.3: Thursday’s and Saturday’s at noon

◾1100 KFNX: Sunday’s and Tuesday’s at noon

Of course, you can always find “Next Week In Stocks” on:

◾550 KFYI: Saturday at 1pm and Sunday at 4am

December 5, 2015: The Long And Short Of It

This show was recorded on December 2, 2015. On this day, three members of the Fed came out and suggested that rates would move higher at their meeting on December 16th. I’m still not convinced they will raise rates, but they have dug themselves such a large hole by convincing everyone that they are going to do it that they might just follow through. I don’t think that the data between now and then will really make any difference, so we’ll just have to see what they actually do. If the Fed does raise, the market could take a hit over the next few months, as we have discussed many times. Not because the .25 likely point increase is that important, but because of the signal that will be sent that the easy money is over.

This is one of the areas of short-term concern. There are others we discussed in the show, but there are also long-term concerns. If history is any guide, given where stock valuations are currently, we should expect stock market gains of 1% or less over the next 20 years (after inflation). Of course, anything can happen and historically there has been a lot of variance in these returns, but for reasons discussed in the show, it is likely that returns will be much lower than the assumptions made by pensions and buy and hold investors.  This puts a lot of peoples’ retirement plans at risk. It also means that there will likely be moves to raise taxes to cover “shortfalls”, increasing the sluggishness of future economic growth. When you add in all the debt in the world to this mix, it is hard to see where we will get growth from for literally decades, without undergoing a serious economic crisis.However, given all of this, there will still be a lot of opportunity to make money in the markets, but it will require more flexibility, not just buying and hoping.

This topic will be the focus of an upcoming class, “Achieving Your Financial Goals In A Zero Growth World”. If you would like free tickets, call 84-48-Income (844.846.2663) and tell them that you read about it on the Next Week In Stocks website. I hope to see you there.

Check out this week’s show:

Click Here For Free CD Offer!

If you would like to submit a question to the show, or to give us feedback, please send an email to:  phoenix@tradingacademy.com. Also, check out our sister show, “The Right Side Of The Trade” on the following stations:

◾Money Radio 1510 and 99.3: Thursday’s and Saturday’s at noon

◾1100 KFNX: Sunday’s and Tuesday’s at noon

Of course, you can always find “Next Week In Stocks” on:

◾550 KFYI: Saturday at 1pm and Sunday at 4am